Salary schemes for a sales representative of a dairy group. Sales representatives income

Mansurov Ruslan Evgenievich,

Candidate of Economic Sciences,

Director of Human Resources Management at Nefis Cosmetics OJSC

Issues of increasing the efficiency of personnel have always been of particular importance, and the sales staff of distribution companies is no exception to this. On the contrary, in the context of the developing financial crisis and tougher competition, issues of increasing the efficiency of the sales system are becoming decisive in the survival strategies of domestic companies.

This article presents practical experience in reforming the remuneration system of a small distribution company, Success LLC, in which the author was involved as an independent consultant and led the reform of this system.

So, the company “Success” LLC operates in the FMCG (consumer goods) sector and is the official distributor of the largest manufacturer. The company is relatively young, it was founded in 2006, but has already managed to gain a significant market share in its region. The stage of rapid growth is over, the company is already “on its feet”, sales volume is stable and there are no signs of trouble. However, the global financial crisis broke out and, although the company did not have a large amount of credit funds, troubles could not be avoided. Sales growth has stopped. And although a decrease in volume has not yet occurred, this prompted the company’s owners to think that analysis and certain management actions in this regard are necessary. At this stage, third-party consultants were invited to diagnose the situation, develop and implement a set of anti-crisis measures.

Thus, during the analysis, it was revealed that over the past 6 months the company has not acquired more than one new regular client. Many small ones appeared with very small sales volumes, which quickly disappeared.

An analysis of the remuneration system for sales representatives showed that bonuses are awarded to employees depending on two factors:

- % of sales volume for the past month;

If new clients are attracted, a bonus (increasing factor) is introduced equal to 20% of the bonus amount.

At the same time, the assessment for the indicator “Attracting new clients” was made based on the presence of a new attracted client, without taking into account its size and the long-term nature of its attraction.

In other words, the sales representative, in order to receive his bonus, attracted a small (someone simpler) client, but did not care at all about further work with him, did not “spud” him. As a result, such a client left for more favorable conditions. In addition, cases were identified when the same client (retail sales point) was considered “new” for different sales representatives with a time gap of 2 months!

Thus, the sales representative received the main part of the bonus component of remuneration due to the old, established client base, an additional bonus due to attracting unimportant clients, whom he then abandoned as unnecessary and they left. It’s just that the bonus of 20% of the bonus turned out to be greater than the increase in the amount of the main bonus from the increase in sales volume. It is worth noting that the level of wages was high enough to relax, “get fat” and not fight for every ruble. The remuneration system looked like this (see Table 1).

The business coach’s remuneration was time-based and did not depend on sales volume, but depended on the objective (or subjective) opinion of management about the effectiveness of the sales representatives he trained.

Table 1.

The current system of remuneration for employees of LLC “Success” with a sales volume of 15,000 thousand rubles per month

No.	Job title	Qty	Tariff, rub	Prize, rub. (0.1% of sales)	Bonus, rub. (for attracting new clients), 20% of the bonus	Total, rub.
	Sales Representative
	Business trainer
	Total:

* The bonus is paid monthly by decision of management, taking into account the achieved results in training sales representatives.

Thus, summing up the analysis, it should be noted that, in general, the staff of sales representatives calmed down and lived calmly in the positions they had already won. The business coach, on the other hand, was in a somewhat demotivating work environment associated with the uncertainty of his potential punishment or reward.

In order to fundamentally correct the current negative situation, the following change to the remuneration system was proposed.

It was decided to allocate in the group of sales representatives employees who work only with new clients and employees who work with old clients. The division of personnel was made based on the results of psychological and professional testing, taking into account real achievements. Various training and development programs have also been developed for these groups of sales representatives.

Thus, the former were required to find new customers, and the latter were required to retain and increase sales from old ones. Accordingly, it was decided to make the premium part of the former dependent solely on the number of new clients attracted. At the same time, since the company needed to increase its presence in the regional market, the volume of sales from new clients for these sales representatives was not taken into account. Also, in order to compensate for the greater complexity and, to a certain extent, uncertainty of the result obtained, it was decided to increase the tariff portion of sales representatives engaged exclusively in attracting new clients to 13,000 rubles.

It was also decided to make the remuneration of the business coach dependent on the results actually achieved during the reporting period. Thus, we will reduce the fact of subjectivity when determining remuneration for a given employee and motivate him to improve the quality of training for sales representatives.

As a result, the following remuneration system was formed (see Table 2)

Table 2.

The proposed system of remuneration for employees of LLC "Success" with the volume growth sales 150 thousand rubles per month

No.	Job title	Qty	Tariff, rub	Prize, rub.	Total, rub.
	Sales representative (working with new clients)
	Sales representative (working with old clients)
	Business trainer
	Total:

* the bonus was calculated in the amount of 10% of the tariff for one attracted client. Thus, it turned out that when attracting 10 new clients, the employee received a bonus of 100%; if 0 new clients were attracted, no bonus was paid. If a sales representative attracted more than 10 new clients per month, the bonus increased proportionally, there were no restrictions.

** the bonus was accrued depending on the increase in sales volume. At the same time, the increase in sales due to new customers attracted in the current month was not taken into account. Only the increase for old clients was taken into account. However, when determining the level of growth in the next month, the value with new clients was taken as the base one (which needs to be improved). In this case, it was decided to accept a bonus of 12% of sales volume. This was done in order to maintain the wage fund at the current level.

*** the bonus was awarded depending on the completion of assigned tasks for sales representatives and was divided into two components. The first part is up to 50% of the tariff for attracting new clients by sales representatives. The second part is also up to 50%, depending on the increase in sales volume for old clients. The first part was paid at the rate of 5% for each new client attracted by the sales representative. The second part is 5% of the increase in sales.

It is worth noting that one of the key goals in reforming the wage system was not to increase the wage fund of workers, which was achieved.

Analysis of the results obtained over six months showed an increase in sales volume by an average of 5-7% monthly!

In this case, we looked at a slightly simplified example of the work done. This was done deliberately so as not to overload the author with secondary, less significant information, but to focus his attention on the main mechanism for achieving the desired result.

And one more thing.. What does the global financial crisis have to do with it? Yes, in essence, it has nothing to do with it, it’s just that during the “storm” the company began to react more sensitively to existing problems and solve them more quickly, fighting for competitive advantages.

Let us consider in more detail what criteria and requirements a good salary and a good remuneration system must meet, taking into account the points of view of both management and subordinates. Recording these criteria can provide valuable guidance to the sales manager, even though they are not absolute.

So, a good salary system should:

1. Motivate sellers. The remuneration system should perform the function of stimulating sales personnel. It should encourage sellers to meet or exceed targets.

2. Monitor the activities of sales representatives. An effective compensation system should act as an invisible check on sales representatives, allowing management to better manage the activities of sales personnel. The remuneration system should provide sufficiently flexible incentives necessary to compensate for the efforts made to solve such diverse tasks as full-time work, “missionary” activities of salespeople.

3. Motivate to treat clients correctly. Today, companies are beginning to compete more and more in the area of ​​service provision. A good remuneration system is one of the factors motivating sellers to work correctly with customers, thereby ensuring their greater satisfaction. In other words, if, when determining the amount of wages, attention is paid only to volumes, then losses in the quality of service will be inevitable.

4. Be good enough to attract and retain competent employees. An effective compensation system is one of the reliable tools used to create a highly qualified staff of sales representatives. Because it allows not only to retain the best personnel, but also to attract new employees to the company who have valuable qualities and knowledge.

5. Provide the employee with the opportunity to know in advance how much the salary depends on his efforts and how much he can earn. The employee must be aware of all the requirements for his job and all the rules that determine his remuneration. That is, how much and for what he receives. Otherwise, he will work in accordance with his own subjective ideas about the goals of his work and the integrity of his management in assessing his work. And this, in turn, leads at a minimum to a mismatch between the goals of the employee and the enterprise. It is clear informing of employees about the criteria for remuneration for their work that allows such problems to arise.

6. Meet the employee’s expectations on time. It is necessary to reduce the time between receiving the result and paying the bonus as much as possible. For example, performance bonuses that are achieved within a month should, to the extent possible, be paid at the end of that month. That is, you did your job - get the money you earned. A good spoon for dinner. But the performance of some workers can only be determined after a long period of time. It is also important to encourage such actions, but then it will most likely be a bonus at the end of the year. In any case, this must be done with a clear mention of the reason for the promotion.

7. As far as possible, adequately match the efforts of employees. In most cases, an indispensable condition for receiving remuneration is only the achievement of certain results. This situation can be very contradictory and even conflicting. An employee can work very hard, put in a lot of effort, but at the same time achieve modest results and, accordingly, receive low rewards. It is imperative to take into account how the effectiveness of his work actually depends on factors that are and are not subject to his control. For example, we looked at possible differences between different territories served by sales representatives. In one area you can exert less effort, but the result will be significantly greater than in another with more intense work.

8. Carry out a “natural selection” of the most hardworking and capable. That is, it must systematically encourage these qualities, their manifestations, and punish others, so that there is a constant repulsion of the incapable and lazy.

9. Be both economical and competitive. That is, companies must pay employees what they earn. If companies pay more than employees earn, nothing good will come of it. The remuneration system must be economically justified. A company whose wage costs are disproportionate to the revenue it receives will either begin to increase the price of its products or face a reduction in profit margins. Most companies, however, try to keep hospitality costs at a competitive level. It is not always easy to find a balance between cost-effectiveness and competitiveness.

10. Be both flexible and stable. It should provide the opportunity to receive both variable income, depending on the results of work over a certain period of time, and stable income. In other words - a constant salary plus interest. The remuneration system should be flexible enough to best suit the needs of specific sellers. Some companies use individual compensation systems where the sales representative can choose what percentage of his salary will be fixed and what percentage will be based on his performance. Flexibility is also necessary to accommodate product differences. Some products are in constant demand and may be subject to frequent re-orders. Other products are sold in single copies and therefore require additional effort and a creative approach to selling, which is worthy of special encouragement. At the same time, the basis of the remuneration system must be stable. Only then can we expect from the employee at least some kind of attachment to the company, necessary for the successful achievement of common goals.

11. Provide the opportunity to earn a stable and rewarding income at the same time. Every compensation system must provide employees with at least a minimum level. The principle of this provision is that the seller does not have to worry about how he will earn a living. If it's a bad month, or the company is experiencing a slow season in the market, or a sales representative is unwell and unable to work for a while, then he should receive some income. However, this constant income should not be too high, so as not to reduce the interest in incentive payments.

12. When used for the purpose of additional incentives, the salary should change by more than 10-15%. Otherwise, it will not be able to have a noticeable effect in terms of stimulation. This is what practice shows.

13. Do not include too many components in the variable part. If there are more than six components, then they lose their motivational effect. Sellers lose the connection between their actions and different components of wages, it becomes difficult to navigate them and choose the most effective plan of action.

14. Among the components, also include points of reward for collective results. Corporate-wide bonuses promote team cohesion, coherence in employee work, and consideration of the interests of other departments. Ideally, an employee should receive three bonuses:

• for individual results, which stimulates his personal productivity;
• for the results of the work of his unit, which contributes to a good climate in the unit and increased productivity;
• for the results of the enterprise as a whole, which contributes to the employee’s acceptance of the enterprise’s goals.

At the same time, it is necessary to convey to employees a simple truth: in the absence of collective results, the enterprise will not have the money to reward high individual work results.

15. Easy to understand. Simplicity is a sign of a good compensation system. Sometimes simplicity and flexibility become conflicting goals - and this is true: a simple system may not be flexible enough, and the system may achieve adequate flexibility at the expense of simplicity. However, the salary system must be simple enough for employees to easily understand it: they must quickly calculate their income. The manager's task in this case is to find a middle ground, taking into account the importance of both conflicting goals.

16. Be fair. A good compensation system should provide fair evaluation of the performance of all sales representatives. Nothing can quickly destroy an employee's positive attitude than the feeling that his pay is unfair. One way to ensure evaluation objectivity is to strive to use, as much as possible, measurable evaluation criteria that can be controlled by sellers. But here, too, one cannot go beyond the reasonable, so as not to cause confusion.

17. Be effective in the period of time in which its components meet the requirements of the situation. The point is that no remuneration system can be effective in every situation. Each company should have a system designed for its specific purposes, relevant for a limited period of time. There may be significant similarities in the general features of systems used by different companies, but the details should reflect the characteristics of each company as well as the specific situations in which they find themselves.

18. Developed by the company’s management, taking into account the opinions and suggestions of the sales representatives and sellers themselves. Because sales representatives will better and more enthusiastically accept the remuneration system in the process of development of which management consulted with them.

If you carefully go through all the listed points, you will notice that some of them take into account the interests of employees to a greater extent, while others take into account the interests of the company.

Main types of remuneration systems

1. A fixed salary is a fixed element that depends on the amount of time the sales representative works.
2. Direct commissions are a variable element depending on the results obtained from performing a certain amount of work.
3. Combined wage systems.

1. Simple salary system (hourly form or salary). The amount of payment depends on the unit of time, and not on the amount of work performed. Salary is a fixed element of the remuneration system. In each time period, the same amount of money is paid to the sales representative regardless of his sales volume.

Advantages of this method. A regular income guarantees the employee absolute confidence, stability and reliability. Accordingly, his loyalty and reliability, commitment to the company, and satisfaction with cooperation with the company increase. The result is low staff turnover. This form of remuneration allows you to require sellers to perform various functions that are quite important for the company, but are not directly related to sales. For example, sales staff can spend more time focusing on the customer's interests. That is, he can spend more time on each client and provide him with better service. Ease of understanding can also be highlighted as a positive touch. This payment system is the simplest and most understandable, which allows us to minimize the likelihood of various disputes and misunderstandings.

Disadvantages of this method. A permanent salary is not a direct incentive for an employee. Although you can compensate for this disadvantage by changing the size of the bet, which may well become an incentive. With this form of payment, it is difficult to evaluate the employee’s performance. It is difficult to relate the salary amount to various criteria that evaluate an employee’s performance. For a company, such a salary is a constant expense that does not depend on the profit received or whether sales volume decreases or increases. That is, they sold a lot - they paid, they sold a little - they still paid.

When is the best time to use this method? First of all, when management can effectively control and stimulate sales representatives. The following specific situations can be cited as examples:

• sales representatives are still in training or are still too inexperienced to earn enough on a commission basis;
• the company wants to enter a new geographical market or sell a new range of products, that is, when forecasting sales volumes is problematic;

2. Payment system based on direct commission payments. What is a commission? This is a regular payment for completing a certain amount of work. Sales representatives usually receive commissions based on the results achieved on those parameters that are under their control and depend on them.

The choice of commission percentage may depend on:

• the target level of income for sales personnel determined by the manager;
• the profitability of this particular product;
• difficulties in marketing specific products;
• the type of customers attracted or served by the sales representative.

A higher percentage should be paid for the sale of more profitable products to stimulate their sales. The commission percentage can be constant for any sales volume, or it can be sliding, increasing or decreasing as sales volumes increase.

Advantages of this method. Has a huge stimulating effect on sellers. Provides unlimited opportunities for income growth if there is no upper limit on commissions. It is a strong motivator for employees, encouraging them to work harder. It's easier to weed out underperforming sales representatives. It is a variable expense item for the company. They sold a lot - they paid a lot. They sold little and paid little.

Disadvantages of this method. It is difficult to control and manage the activities of sales representatives in other areas not directly related to sales. The dominant desire of sellers is the desire to sell as many products as possible without taking into account the interests of the company or the client. Sellers concentrate their efforts only on products that are easy to sell and neglect the sale of difficult-to-sell products. Customers may be sold more products than they need, including items that are not the ones they need or are interested in. Sellers show no interest in providing customers with a high level of service. Since the company does not provide a guaranteed income, sellers tend to believe that they do not owe it anything. That is, loyalty and commitment to the company is at a minimum level.

When is it best to use this method:

• When a company is in a vulnerable financial position and therefore distribution costs must be linked directly to sales volume.
• When a sales representative begins to lose interest in work and a strong motivating factor is needed to achieve appropriate sales targets.
• When there is no need to admonish the product, provide customers with quality service, or after-sales service.
• When there is no need to develop long-term relationships with clients.
• When a company uses part-time salespeople or independent contractors, such as manufacturing sales agents.

3. Combined wage systems. We looked at two extremes: bare salary and bare bonuses. Now let's look at something in between - combined systems. Their task is to overcome the weaknesses of using one method while maintaining its advantages.

1. salary plus commissions;
2. salary plus bonus (bonus);
3. salary plus commissions and bonus (bonus).

As you can see, all three options include the ratio of the constant and variable parts. Which part will be present as an element of incentives, and which in the form of a fixed salary, should depend on the nature of the sales tasks and marketing goals of the company.

Now let's try to define the terms.

An award (bonus) is a one-time payment for achieving above-standard indicators. The bonus cannot be used on its own but must be used in conjunction with another element, salary or commission. The most commonly used basis for calculating bonuses is the evaluation of the sales representative's performance against the plan. Fulfill the plan - get a bonus. A sales plan (quota) is a target assigned to a marketing unit for a specific period of time. A marketing unit can be: sales representative, branch, district or region, dealer or distributor.

The target may be expressed in terms of money, units of production, or sales activities. For example, each sales representative may be given a target sales volume for a three-month period, a gross profit, or be tasked with meeting the needs of a customer. Quotas may also be assigned to each type of product or type of customer. If salespeople meet their quotas, they often receive some type of compensation or performance bonus. For example, a sales representative might receive a cash bonus of "X" for exceeding sales quota by 10%.

Salary plus commissions. It is used more often than all other methods. The question often arises: what part of wages should be made constant and what part variable? Typically the variable portion is 40% of the total remuneration. But you need to remember one thing. Neither option is always good.

This type of payment contains the benefits of a fixed salary, and also provides flexibility and incentives through commission payments. But we must not forget that the introduction of incentive elements to the detriment of the fixed part of the salary may entail a weakening of management control over sales personnel. That is, by increasing the share of commissions, you can increase the activity of sellers and sales volumes, while increasing the share of the constant part allows you to improve manageability and control. So salary plus commission is an ideal option when a company wants to keep its employees under control, but at the same time wants to encourage their activity.

The success of a salary plus commission system or any other combination system depends primarily on the balance achieved between the elements.

Salary plus bonus (bonus). An ideal option for remunerating sales representatives if a company wants to keep its employees under fairly strict control, while at the same time offering them a certain element of incentives. The difference here compared to the previous payment method is that the fixed portion exceeds the variable portion of the remuneration much more than in a salary plus commission system. The use of the “salary plus bonus” system is effective in stimulating any action in the short term. For example, if a company is interested in attracting new customers, stimulating repeat orders, or increasing outreach efforts for a particular product.

Some companies use bonuses to help salespeople focus on long-term goals, such as increasing customer satisfaction. Many companies use bonuses to reward teams for performance. If the team achieves its goals, then all team members receive a bonus.

Salary plus commission plus bonus (bonus). By far the most common system. It combines all three components - salary, commission and bonus. This allows, on the one hand, to ensure the presence of a certain level of control, at the same time to reward employees and offer a bonus for solving special, specific tasks. An example of a specific form is base salary, commissions and quarterly bonuses, which for each salesperson are calculated based on customer satisfaction ratings.

4. Relationship between method and goals. It is extremely important to link the compensation system to the achievement of certain goals.

Let's look at examples of goals and options for remuneration systems:

• The goal is to increase revenue by 10%. To achieve this goal, some form of incentive is usually necessary, such as a commission or bonus.
• The goal is to increase sales of a specific product by 10%. In this case, it may be useful to pay commissions at higher rates, on high-margin products, or on any other goods that the company is particularly interested in selling.
• The goal is to increase sales to existing customers. A bonus may be paid for increasing sales to existing customers by a certain percentage. The bonus may be linked to a quota for repeat orders. An alternative is to pay higher commission rates on repeat orders.
• The goal is to increase customer satisfaction. A bonus is the best way to accomplish this goal, although a salary increase can be quite effective.
• the goal is to stimulate outreach activities. Explanatory activities may include training dealer salespeople, conducting presentations or preparing exhibitions, expositions, and other activities not directly related to the sales process. Some of these efforts can be measured on an individual basis and a bonus paid upon completion. Efforts that cannot be easily measured may be rewarded by increasing the salary percentage of the total.
• the goal is to invade new territory. Perhaps all income should be in the form of salary, at least in the initial stages of developing sales in a new territory.

Development of a remuneration system for sales personnel

There are 6 main stages in developing a remuneration system:

• Studying job descriptions.
• Determining the goals of the remuneration system.
• Setting the level of remuneration.
• Development of a payment method.
• Choice of indirect monetary payment.
• Putting the system into operation.

Let's look at each one separately.

First stage. Studying job descriptions. At this stage, it is necessary to identify the essence, scale and possible difficulties associated with the implementation of each type of work. That is, to put it simply, what the seller must do, in what volume, for what period, so that the company agrees to pay for his work.

Second phase. Defining specific goals. There are examples of general objectives that are considered priorities that any remuneration system should strive to achieve. This is due to the fact that any company goes through different stages of its development and experiences different life cycles. Accordingly, at each stage the company may face different tasks. For example, the stage of entering a new market. The immediate task is to cover this market. The problem has been solved and the market has been covered, another task must be set. Let's say an increase in sales to existing customers. The next task is, say, expanding the range of existing customers. After solving it - improving the quality of customer service, then - expanding relationships with customers, and so on. It is important to remember that there is a direct connection between the tasks that the company faces and the payment system the company uses. If a company is faced with the task of improving the quality of customer service, and it pays sellers a percentage of sales volume, then this task cannot be solved with the help of such wages. Why? Because if a sales representative receives bare interest, then the most important thing for him will be the quantity of goods sold. He will sell as much as he can, as much as he can. And the last thing you will think about is the quality of service. After all, it does not affect his income in any way. In the same way, if a company wants to increase sales volumes, but only pays a salary, then again nothing will work. That is, you need to understand that the remuneration system that was effective at the previous stage will not necessarily be useful at the new stage. That's why there is a rule that says that wages cannot be good for every situation, always.

Examples of specific goals:

• increase income by 10%;
• increase sales of certain products by 10%;
• increase sales volume to existing customers;
• increase customer satisfaction;
• develop sales in a new territory.

It is necessary to base each sales representative's compensation on those factors that are most within his or her control. Otherwise, at least the principle of justice will be violated, which will immediately entail undesirable consequences. It is necessary to carefully consider the elements that a company can measure:

• quantity, sales volume;
• sales expenses;
• number of visits;
• number of new clients;
• number of presentations held;
• gross income.

The more accurate the measurements, the more effectively it will be possible to use the remuneration system as a factor influencing the success of the company.

Third stage. Setting the level of remuneration. The salary level refers to the average income of a sales representative over a certain period of time. The level of pay is in many ways more important than the method.

People are more interested in how much money they made than how they made it. Very often, managers ask me how best to pay. I tell them that this is not where we should start. How to pay is not so difficult to figure out. First, the manager needs to find out for himself how much he wants to pay, how much he can pay and how much he will pay this employee. Only then do you need to move on to identifying the components of the salary, taking into account various factors and criteria. This is the only way to not get distracted, not to forget that we are talking about a person who has certain expectations and will first of all pay attention to the amount of the salary, and then to what it may consist of.

Therefore, one of the main efficiency factors is that sales personnel are paid at a competitive level compared to other companies.

Fourth stage. Development of a payment method. Management has in its arsenal the following elements for creating a remuneration system:

• salary;
• Commission;
• bonuses;
• indirect monetary benefits (for example, holidays and insurance);
• compensation of expenses.

Some of these components are means of rewarding employees, others guarantee stability and reliability of income, and others can help the company control distribution costs.

One of the main questions tormenting any manager is how to properly build a system of motivation for a sales representative. Here we give an example of the remuneration system for one of the holdings involved in sales in the sector FMCG. Consider the city sales department.

1. Remuneration system in the Department of City Sales of Dairy Products

The salary of a sales representative is based on three components:

1) Salary (it is 20-25% of the total amount);

2) Payment for the increase in sales volumes to the base value accepted in a given territory in a certain period of time (it is 60-70% of the total amount);

3) Payment for working in a team under the leadership of a territorial manager, aimed at implementing the current tasks of the Company (can be 5-20%).

The basis for calculating salary is the data provided by the analytical department at the end or beginning of the month for the previous month. They are summarized in table form into absolute and relative indicators of deviations relative to base periods, plans and their actual implementation.

The main criterion for calculating salary is achieving the maximum increase to the base value of sales volume. Actual performance and planned values ​​may differ greatly. This is explained by the fact that the basic values ​​change quarterly, taking into account seasonality, the emergence of new assortment items or their exclusion.

Now about the numbers:

1. The base salary of a sales representative is set at 10,000 rubles for everyone, regardless of length of service.
2. The formation of accruals for growth is as follows: the sales volume in the assigned territory in the current period is multiplied by a factor of 0.015. At the same time, the percentage of growth in his territory is calculated for each sales representative. Taken together, all the numbers add up to a certain number, which is used to calculate the premium application rate (PPC). According to the formula accepted today, the amount payable to the sales representative is calculated. It should be noted that the checkpoint directly affects this amount. Negative growth carries an additional monetary penalty. A sales representative can obtain data on his sales volumes by requesting them from his territorial manager.

Negative or worse growth indicators within 2 months serve as additional grounds for deeming a given employee unsuitable for the position held.

1. Payment for teamwork follows from the general bonus fund, which is distributed among groups of territorial managers. They, in turn, distribute it among their sales representatives. This distribution of the fund occurs on the basis of the “Sales Representative Account Sheet”. It contains penalty and bonus points for specific indicators (see Appendix No. 2). This document is public, which means your sales representative can review it.

Why and why was this book written? Many years ago, although, to be honest, quite recently, when I was just starting to work as a sales representative, from the very first minutes I found myself in an atmosphere of complete uncertainty. Thrown into the “fields” to conquer shops and kiosks, I naturally felt blind, and also not knowing where the right road was. Questions on the topic: “What to do? How to sell? How to sell successfully"; – appeared daily and in huge numbers. Weeks and months passed, my professional interest deepened, and I was already asking myself about more complex things: “What is trade marketing? What about distribution? What should come first: distribution or sales? Why do some companies behave in the “fields” this way, while others behave differently? What is the difference between a sales manager and a sales representative? For answers, I turned to my supervisor (and who else if not my main partner and mentor!). But he preferred to tell me about the wonderful prospects awaiting the company if each trade representative works hard. I admit, this reminded me of my recent pioneer past, and from that moment my questions became much sharper and more dangerous: “Why don’t supervisors know anything? Why is my price 5% higher than that of a wholesaler at the Mytishchi market? Why does a company “launch” a new brand every month, and then forget about it two months later? Why are unrealistic plans put forward over and over again? The boundless curiosity of the sales representative could not be satisfied even by a professional company trainer, who politely avoided answering and in return predicted a bright career future for me, of course, if I, in turn, stop asking about such things and concentrate on mechanical work.

11. Salary of sales representatives.

Any work should be adequately paid, especially if it is done in good faith. However, the principle of calculating salaries for field personnel still remains one of the most unknown and confusing phenomena in the world. Nine out of ten trade representatives will not be able to explain with sufficient confidence why they earned exactly that much last month, and not more or less. Most will say that management is being clever, some will nod at the accounting department, but almost everyone will be sure that they are seriously underpaid. And indeed, wage fraud in trading companies is not uncommon. Income consists of a fixed and variable part, which allows the employer to shamelessly manipulate the final amount, significantly reduce their personnel costs and keep sales representatives on a short leash. The purpose of this article is to increase your awareness of the mechanisms for paying trade representatives, to find out the positive and negative aspects of each system.

As I mentioned above, the income of sales representatives is formed from a fixed salary and bonuses. However, as a rule, the salary itself is not high and can even be equal to the minimum wage established in the region. In addition, some employers have the bad habit of including compensation for a car and telephone service in the salary amount. But remember, if during an interview a potential manager persistently confuses compensation with salary, think seriously: this company intends to seriously underpay you. It is stupid to mix work and family budgets, otherwise the former will suffer in any case!

Foreign companies (not all) and some domestic ones view the bonus as a minor part of the sales representative’s income. The principle is professed: bonuses come and go, and an employee should not think at work about what his family will eat tomorrow, so employees’ fixed salary is two-thirds or more of their income. In fact, such a humane system does little to stimulate trade representatives to work, because it was not the stupidest people who came up with the principle “what goes around comes around.” The most reasonable system is when the salary is sufficient to meet the minimum needs of the employee, but does not exceed half of the total income.

So, let's talk about bonuses.

Linear(percentage) is a very common and predominant bonus scheme. In this case, the sales representative’s income is calculated according to the following scheme: salary + x percent of sales (optionally, from the achievement of another indicator). What's good about her? In theory, everyone! In this case, your earnings depend only on your performance. If a trade representative works better than his colleagues, he gets more. However, there are also a lot of disadvantages.

Firstly, your capabilities are limited by the number of retail outlets in the territory, their traffic and quality, the seasonality of the product, its availability in the warehouse, the activity of competitors, and, finally, the variability of customers. Imagine that you sell ice cream and in the summer you receive fabulous money, and in the winter you “suck your paw”, and this despite the fact that the management is “dripping on your brains” every day, demanding summer sales. Or you got a remote area with small shops and poor customers, and a more fortunate colleague got the Kazansky railway station. And so you run, rush around the territory until late at night, but the result is still weak, and your colleague goes to lunch at twelve, then picks his nose for the rest of the day, and as a result, he gets twice as much.

By the way, this leads to the second disadvantage. With such a payment system, you always come into sharp conflict with your colleagues. If the earnings of team members differ sharply, then believe me, no amount of discussion about experience, the specifics of sales and other significant circumstances will help restore trust between employees. Offended people will definitely appear and begin to disintegrate the team. There will also be intriguers trying to change the situation by dishonest means, including taking away your best clients.

Thirdly, if you get sick or go on vacation, you will most likely receive only that meager salary.

Fourthly, as soon as you start earning a lot, your bosses will definitely change the motivation scheme or transfer you to prove your professionalism to another undeveloped territory. Let's look at an example. Your salary is 20,000 rubles + 5% of sales volume. If you sold 300,000 rubles in a month, you will receive 20,000+15,000=35,000 rubles. And everyone is happy. But the volume increased to 600,000 rubles and you were credited 20,000+30,000=50,000 rubles. Your salary suddenly became higher than the average for your team, company, and specialty in general. The bosses begin to think like this: “Why do we need to keep an expensive trade representative, if with this money we can hire two cheap ones who won’t attract stars, but will still increase the coverage of the territory?”

And in principle, the company will be right. Such a system corrupts any person if he starts earning almost as much as he wants. At this stage, the sales representative stops thinking about expanding the business and increasing key indicators. Think about it, why work an extra hour a day for an additional 3,000 rubles, if you already receive 45,000, which is enough to live on?

In general, high earnings for a sales representative are a short-term phenomenon. No company, no matter how sincere its principles of caring for field employees may seem, is interested in their decent earnings. Most companies do not want to pay their sales representatives fairly, and you will encounter this more than once. As soon as the income of sales representatives increases with optimal labor costs, the motivation scheme immediately changes, bringing down all indicators.

Now let's look at the linear bonus through the eyes of your boss and understand the main drawback of the system under consideration for him. Working for a percentage depersonalizes the company's product range. First of all, they expect money from the sales representative, and he brings it. But the manufacturer is always interested in promoting new brands and expanding distribution. What you most likely will not do unless you receive a special task. For example, from the general sales plan the amount that should fall on the key brand will be allocated. If you fail to complete a special task, your bonus will be seriously reduced. But trade representatives are also not stupid and have long come up with a way out of the situation by selling goods that interfere with quiet work in one or two large points, which, you see, does not improve distribution in any way. Those sales representatives who fail to do this, having received a meager salary a couple of times, write a letter of resignation, since the demand for representatives of this profession exceeds the supply. In both cases, the boss remains in the red.

Fixed bonus – This is a clearly defined cash bonus that each sales representative can receive if they complete one or a number of assigned tasks. The size of such a bonus is calculated as a percentage of completion and has a limit threshold. This system is mainly used by employers who set restrictions on the maximum income of a sales representative.

How is the fixed bonus calculated? Imagine that the maximum bonus amount of 10,000 rubles is paid for completing two tasks. The most important of them costs 6,000 rubles, the second – 4,000. The bonus is calculated if the task is completed at least 75%. At the end of the month, trade representative Ivanov achieved 85% of the target for the first task, and 90% of the target for the second; accordingly, he was awarded (6000*0.85=5100)+(4000*0.90=3600) = 8700 rubles bonus. Trade representative Petrov has different figures: 70% and 100%. And his bonus (6000*0=0)+(4000*1.00=4000) = 4000 rubles.

Why is a minimum completion percentage introduced? Is this fair? After all, if Petrov “brings” not zero, but five percent at the end of the month, his bonus will not change. Why not pay the trade representative an additional 4000*0.05=200 rubles? Despite the fact that I myself worked as a sales representative for a long time, I will be honest: this is a fair system. The company expects that it employs employees who have sufficient experience and qualifications to perform the assigned task. Below is unprofessionalism, why pay for it? A fixed bonus is an optional part of the remuneration; first of all, it is a motivation tool, rewarding those employees who are ready to work conscientiously and better than others.

For a sales representative, a fixed bonus has a positive side: in addition to a guaranteed and sufficient salary, he also receives a pleasant increase, and this is in a calm, uninterrupted job. But there is also a significant disadvantage - equalization, because no one will pay you more if the plan is fulfilled, for example, by 120%. Therefore, soon the zeal for work will subside and you will meet 80 percent of the work, so as not to get hit in the neck.

For an employer, a fixed bonus comes with a lot of benefits. Firstly, such a bonus system allows you to direct the team’s efforts to solve current problems. Secondly, the management of sales departments deliberately exaggerate the final goals when planning. Let me explain, when tasked with selling for a million rubles, sales representatives are given a plan for one million two hundred. Trade representatives bring 80% from the “fields”, that is, they sell for 960,000 rubles, which practically corresponds to expectations. Third, it is a fixed percentage of labor costs. Fourthly, maintaining team spirit, because the incomes of trade representatives vary slightly. Fifthly, increasing the controllability of the sales process. The only, but significant, disadvantage is the desire of sales representatives to complete tasks at a certain level.

Of course, practice is much richer. Many companies use their own combined schemes to motivate sales representatives, but they are always based on a linear and fixed bonus system.

Whatever the company, large or small, foreign or Russian, manufacturer or distributor, in any case, the remuneration system for sales representatives must meet the following parameters:

– simple and understandable (when each employee can independently calculate their income);

– relate to the wishes of the staff (if the employee himself participates in the development of the motivation system, he then works with great pleasure);

– there should be no more than five criteria for awarding bonuses (otherwise there will be confusion, and not only among trade representatives);

– match the labor contribution of employees;

- meet the company's goals.

But that's not all! The minimum possible income must be consistent with the living comfort zone in a given region, that is, determine in advance the amount that allows the employee to live more or less with dignity (precisely with dignity!) until the next payday. And least of all, I advise the employer to focus on the average market value of remuneration for trade representatives: due to regional specifics, it can be either underestimated or seriously overestimated. Both of these options lead to negative consequences for the company.

An effective payment system allows you not only to attract new employees, but also to retain old ones. The lack of one is one of the main reasons for staff turnover. Tell your manager about this and I think he will agree.

A sales agent's salary is usually paid on a commission or bonus basis. His job responsibilities include promoting the company's products on the market and selling them. Accordingly, the sales agent's fee should directly depend on the sales volume: the higher the sales volume, the more income the company will receive and the higher the employee's salary.

When earning on a commission basis sales representatives usually receive commissions based on the results achieved on those parameters that are under their control and depend on them. The commission percentage may depend on:

• the target level of income for sales personnel determined by the manager;
• product profitability;
• difficulties in marketing specific products;
• the type of customers attracted or served by the sales representative;
• region in which the product is sold.

The commission percentage can be constant for any sales volume, or it can be sliding, increasing as sales volumes increase.

The average salary of a sales representative is calculated using the formula:

salary +% of customer payments (or fulfillment of another indicator).

Awards (bonuses)- this is an assessment of the sales representative’s performance according to the plan. If you fulfill the plan or achieve certain performance indicators, receive a bonus. Bonuses can be paid for professionalism and length of service. For a sales employee, the criteria for paying bonuses may be:

• customer focus;
• quality of work, absence of errors;
• exceeding delivery volume plans by a certain percentage, for example 10%;
• Attraction of new clients;
• initiative;
• work experience in the company, etc.

Enterprises, as a rule, use combined remuneration systems:

• salary + commission;
• salary + bonus (bonus);
• salary + commissions and bonus (bonus).

In combined systems, an employee's salary consists of two parts: fixed (salary, tariff rate) and variable (commission or bonus).

A fixed salary is a permanent element and depends on the amount of time the sales representative works.

Variable part depends on the results obtained from performing a certain amount of work. For sales agents, this is sales volume and invoices paid by customers.

Salary + commissions. In this case, when determining the amount of remuneration to employees, employers should remember that employee activity increases due to the amount of commissions. Therefore, as a rule, when using this remuneration system, the fixed part of the payment does not exceed 15-20 thousand rubles.

Commissions directly depend on sales volume. The more money from sales goes to the company's accounts (or the higher the actual profit), the higher the commission percentage.

For your information

It is convenient to calculate the actual profit for calculating commissions based on payment, as when applying the simplified tax system: funds from the sale received to the company’s current account, minus actual expenses incurred.

Salary + commission is a good option that allows you to control employees while encouraging their activity.

Salary + bonus (bonus). The difference compared to the previous payment method is that the fixed part exceeds the variable part of the remuneration much more than in the “salary + commission” system, for example, the salary is 2/3 of the employee’s average income.

The “salary + bonus” system is effective in certain situations, for example, if the company is interested in attracting new customers and stimulating repeat orders.

The choice of remuneration system depends on the goals set by the company. So, the goals could be the following:

1. Increase company income through sales. As a rule, commissions are applied for incentives as a percentage of profits or the amount of funds received.

2. Increase sales of specific products, for example expensive ones. In this case, it is worth paying higher commission rates on high-margin products or on any other goods that the company is particularly interested in selling.

3. Increase the company’s income through new clients. To achieve this goal, employees are usually motivated by bonuses. For example, for attracting two clients and receiving payment from them for products, goods, work, services, an employee is paid 5,000 rubles.

4. Increase sales to existing customers. Both a bonus for increasing sales to existing customers and commissions can be paid. The bonus can be linked to a quota for repeat orders, and commissions can be paid at higher rates for repeat orders.

Salary + fixed bonus. In large trading companies with a large turnover, sales representatives are paid a solid salary and a fixed bonus if the plan is fulfilled or established indicators are achieved.

The fixed bonus portion has a certain upper threshold beyond which it cannot rise. Typically this payment is about a third of the salary.

Goal of motivation: the sales representative must understand that his earnings depend on his efforts and performance, i.e. the principle “he who works more earns more” works.

Note!

The effectiveness of the motivation system, especially when it comes to sales personnel, depends on a number of factors, for example:

from the company's sales strategy;

sales systems, features of sales management;

features of business processes in the company;

distribution of responsibilities within the sales department and between departments of the company.

When choosing a motivation system, you should take into account the functional responsibilities of department employees. Thus, the motivation system of a retail company will be very different from the motivation system of a wholesale company: managers of such companies are required to have different work behavior, they have different tasks and functions, and different performance criteria.

Some motivation systems that are used in practice are presented in Table. 1.

Let's give pay scale examples to pay bonuses to sales agents:

1. The bonus is awarded for each order paid by the buyer that exceeds 10 thousand rubles, in accordance with the payment scale presented in table. 2.

table 2

Payment scale based on orders

The minimum order amount from which the payment of bonuses begins, the interval for the volume of revenue and the bonus amount for each scale are calculated based on the average and maximum purchase, the possible intensity of sales to new customers, the size of the payroll in the company, etc.

2. In some cases, a combination of a bonus payment scale with a percentage of revenue gives a good effect. An example of such a scale is in table. 3.

Table 3

Payment scale based on sales amount combined with a percentage of revenue

3. Commission percentage. A premium using interest can be difficult to calculate.

For example, a sales manager’s bonus is 0.5% of the amount of all invoices paid by clients attracted by the manager. The client's bonus is paid to the sales manager within a quarter from the moment the first invoice is issued to the client according to the formula:

Bonus per month = 0.5% (Σ cl. A + Σ cl. B + ... + Σ cl. N),

where Σ cl. A is the amount of invoices issued to client A for the billing month;

class A - a client attracted by this sales manager, to whom the manager issued his first invoice no earlier than 3 months from the date of settlement;

Σ cl. B - the amount of invoices issued to client B for the billing month;

class B - a client attracted by a sales manager, to whom the manager issued his first invoice no earlier than 3 months from the date of settlement, etc.

4. Calculation of the percentage of the bonus allocated to the department. The percentage depends on the volume of revenue, product profitability, and return on sales. An example of a formula for calculating bonuses per department:

Bonus per department = 0.2% of cash received on account of sales for the month × Number of employees in the department.

Example

A trading company uses a commission system to pay sales workers: for a fully worked month, employees are guaranteed, under the terms of the employment contract, a salary based on established tariffs (fixed part) + additional payments (variable part).

The bonus is allocated to the department and depends on the amount received from sales.

The sales department employs 3 managers. The fixed part of the salary is 20,000 rubles.

For March, the department was allocated a bonus in the amount of 0.5% of invoices paid by clients. RUB 1,200,000 was received from clients to the organization’s bank account.

The calving premium will be equal to:

RUB 1,700,000 × 0.5% × 3 employees. = 25,500 rub.

The size of the variable part of employee compensation depends on the time they worked and the quantity of products shipped (in tons).

The amount of time worked according to time sheets and goods shipped according to invoices is indicated in table. 4.

Table 4

Amount of time worked and goods shipped

Manager	Number of hours worked (hours)	Share of each in the amount of time	Number of sales, t	Each person's share in the amount of cargo	Total estimated share (gr. 3 + gr. 5)	Tariff rate, rub./hour
Manager 1
Manager 2
Manager 3

Share in the amount of time for each employee:

• manager 1 = 155 hours / 450 hours = 0.34;
• Manager 2 = 135 hours / 450 hours = 0.30;
• Manager 3 = 160 hours / 450 hours = 0.36.

Share in the amount of cargo shipped for each employee:

• manager 1 = 110 t / 295 t = 0.37;
• manager 2 = 85 t / 295 t = 0.29;
• manager 3 = 100 t / 295 t = 0.34.

We calculate the hourly tariff rate. To do this, we divide the salary by the number of working hours per month according to the production calendar.

Let's assume that according to the production calendar in March there are 168 working hours. Then the hourly tariff rate is:

20,000 rub. / 168 hours = 119.05 rub.

Managers' salaries for March:

manager 1 = 119.05 rub. (tariff) ×155 hours (actual time) + (25,500 rub. (premium per department / 2 (total of group 6) × 0.71 (share coefficient)) = 18,452.75 rub. + 12,750 rub. × 0.71 = 27,504.75 rubles;

manager 2 = 119.05 rub. × 135 h + (25,500 rub. / 2 × 0.59) = 16,071.75 rub. + 12,750 rub. × 0.59 = 23,594.25 rubles;

manager 3 = 119.05 rub. × 160 h + (25,500 rub. / 2 × 0.70) = 19,048 rub. + 12,750 rub. × 0.70 = 27,973 rub.

________________

5. Award for professionalism. Companies focused on continuous professional development and improvement of their personnel can pay a bonus for professionalism based on the results of certification.

At certification, as a rule, the employee’s compliance with the formal requirements of his position is assessed, for example: the number of attracted and potential clients in work at the same time, level of education, filling out reports, the size of the average purchase. Tests may be offered.

For example, it is assumed that the assessment is on a 5-point scale. The test has 20 questions. The time for answering all test questions is 2 hours. The scale of points for answers is:

• 18-20 questions - 5 points;
• 15-17 questions - 4 points;
• 10-14 questions - 3 points;
• less than 10 questions - 0 points,

The payment scale for calculating bonuses for professionalism by points is presented in table. 5.

Table 5

Payment scale for calculating bonuses for professionalism by points

6. Long service bonus (one of the most common ways to motivate employees).

It is believed that an employee who has been working in one place for less than 5 years has not yet developed informal connections with colleagues and can easily change jobs in the event of a more lucrative offer. After 5 years of working in one place, an employee is less inclined to change jobs; his skills and abilities become more adaptable to a specific place of work, the longer he works there. Such an employee devoted a lot of effort, energy and time to the development and prosperity of this company, therefore, after 5 years of work, the long service bonus expresses the gratitude of the company owners to the employee for his dedication and loyalty.

An example of a payment scale for a long service bonus is in table. 6.

Table 6

Pay scale for long service bonus